Mercantilism

Mercantilism was an economic theory and practice, dominant in Europe from the 16th to the 18th century, that promoted governmental regulation of a nation's economy for the purpose of augmenting state power at the expense of rival national powers.

Quotes

• The motives of the men who fostered the English Navigation Acts... granted the national egotism of mercantilist policy, perfectly proper: they were designated to impede the carrying trade of Britain's rivals, expand English carrying trade, foster a larger navy, and make of England an entrepôt for colonial goods. ...Viewed from the American angle, the Navigation Acts forced our ships to stop in England and transship their cargoes onto British vessels, wherever we had destined the cargoes and whatever the costs and inconvenience... Steps were taken to impede the construction of American ships. When they were built, other regulations hindered their trade in the ports of other British colonies.
  To the English, all was quite fair, since the role assigned to the colony was the production of raw materials, not an independent merchant marine or its own finished goods. ...The American Revolution was as much a war against mercantilism as a war for freedom.
  • Robert Lekachman, A History of Economic Ideas (1959) Part I. The Beginnings: 3. Mercantilism.

• Here then we may learn the fallacy of the remark... that any particular state is weak, though fertile, populous, and well cultivated, merely because it wants money. It appears that the want of money can never injure any state within itself: For men and commodities are the real strength of any community. It is the simple manner of living which here hurts the public, by confining the gold and silver to few hands, and preventing its universal diffusion and circulation. On the contrary, industry and refinements of all kinds incorporate it with the whole state, however small its quantity may be: They digest it into every vein, so to speak; and make it enter into every transaction and contract.
  • David Hume, Of Money (1752) as quoted in David Hume: Writings on Economics (1955, 1970) ed., Eugene Rotwein, p. 45.

• The purposes of the mercantilists were not the same as those of modern economists. Mercantilists were concerned with increasing the power of their own respective nations relative to that of other nations. Their goal was not the allocation of scarce resources in a way that would maximize the standard of living of the people at large. Their goal was gaining or maintaining a national competitive advantage in aggregate wealth and power over other nations, so as to be able to prevail in war, if war occurred, or to deter potential enemies by one’s obvious wealth that could be turned to military purposes. A hoard of gold was ideal for their purposes.
  • Thomas Sowell, Basic Economics, 4th ed. (2010), Ch. 25. The History of Economics

• Mercantilists were by no means focused on the average standard of living of the population as a whole. Thus the repression of wages by imposing government control was considered by them to be a way of lowering the costs of exports, creating a surplus of exports over imports, which would bring in gold. The promotion of imperialism and even slavery was acceptable to some mercantilists for the same reason. The “nation” to them did not mean a country’s whole population. Thus Sir James Steuart could write in 1767 of “a whole nation fed and provided for gratuitously” by means of slavery. Although slaves were obviously part of the population, they were not considered to be part of the nation.
  • Thomas Sowell, Basic Economics, 4th ed. (2010), Ch. 25. The History of Economics